Raju v Narayan [2010] FJHC 190; HBC062.2006L (2 June 2010)

IN THE HIGH COURT OF FIJI
AT LAUTOKA
CIVIL JURISDICTION

Civil Action No: HBC 62 of 2006L

BETWEEN:

JOHN SHANKARAN RAJU
Plaintiff

AND:

SHIU NARAYAN
Defendant

Judgment of: Inoke J.

Counsel Appearing: Mr V Mishra with Ms M Prasad for the Plaintiff
Dr Sahu Khan for the Defendant

Solicitors: Mishra Prakash & Assoc for the Plaintiff
Sahu Khan & Sahu Khan for the Defendant

Date of Hearing: 29 October 2009, 29 January 2010
Date of Judgment: 2 June 2010

FINAL JUDGMENT

INTRODUCTION

[1] This is a dispute over a business arrangement between family members that has gone bad. The Plaintiff alleges that he lent AUD$70,000 to the Defendant in 2003 and 2004 for him to set up a business in Australia. Between 2004 and 2005 he said the Defendant repaid AUD$12,000 to a bank account in Australia then stopped. The Defendant then promised to pay the balance by a transfer of half of his shareholding in his Australian company and his other company trading in Fiji and directorships in both companies. The Defendant only made him a director of the Australian company without the transfer of shares. The Plaintiff says his attempts to get the Defendant to pay his money back were met with rejection and abuse. He now sues for the balance and interest, expenses and costs.

[2] The Defence was basically that the money was lent to the Australian company as an investment. The transfer of shares was part of the investment agreement in respect of the Australian company but the transfer of shares in the Fiji company and directorship was never part of the agreement.

CASE HISTORY

[3] The Writ and Statement of Claim[1] was filed on 6 March 2006. Service was acknowledged on 30 March 2006 and the Defence was filed on 24 April 2006. On 26 September 2007, the order for the matter to be set down for trial was made by the Master. The Defendant changed his solicitors to his current solicitors on 21 January 2008 who filed an Amended Defence on 1 February 2008. The Reply was filed on 26 March 2008. Several directions hearing followed before the Pre-Trial Conference Minutes were filed on 22 August 2008. The matter was then set down for hearing on 6 May 2009 but the Court was not able to hear it and was reset for 17 and 18 September 2009. However, because of the unavailability of one of the overseas witnesses the hearing was adjourned by consent for hearing on 29 October 2009 followed by oral submissions on 29 January 2010.

THE STATEMENT OF CLAIM

[4] The Plaintiff says in his Amended Statement of Claim that in 2002 and 2003 he, at the requests and pleas of the Defendant, lent and/or paid AUD$70,000 to the Defendant for the setting up of a business in Australia. The Defendant agreed to repay the money with interest at 10% pa. He made repayments into a bank account in Australia between 29 October 2004 and 11 November 2005 totalling AUD$12,000. The Defendant could not continue with the repayments so he offered to the Plaintiff directorships and half share-holdings in an Australian company, Macquarie Traders Proprietary Limited, and a Fiji company, Global Cargo Traders Limited. Despite the promise, the Defendant only signed papers for the Plaintiff to be a director in the Australian company.

THE DEFENCE

[5] The Defendant does not deny that the money was lent but says it was lent to the Australian company as an investment in it. It was agreed that eventually, upon the Plaintiff’s request, he would be issued shares in the company. The Defendant however, denies that there was any agreement to issue shares in the Fiji company to the Plaintiff or to make him a director.

[6] In any event, the Defendant says that this was an illegal loan because of ss 7 – 10, 13, 14 and 16 of the Exchange Control Act, the Reserve Bank Act and ss 8, 16 and 18 of the Money Lenders Act.

[7] The Defendant also says that $13,000 was paid back and not just $12,000.

THE EVIDENCE AT THE HEARING

[8] The Plaintiff gave evidence. He said he has known the Defendant since 2000. He met the Defendant when he came to Australia. He is related to him from this wife’s side. The Defendant said to the Plaintiff and his wife that he needed money to run a business of selling second hand motor mowers from Sydney by bringing them to Fiji in containers.

[9] He said he lent the money to the Defendant. It was to be repaid with interest at 10% pa. The Defendant gave him a Westpac bank account number to deposit the money in it. The money was lent in several sums totalling $70,000 - $3,000, $7,000, $28,000, $2,000 then $30,000. The first $10,000 came from his wife. It was withdrawn from a fixed deposit account earning 10% pa. The $28,000 came from the Plaintiff. The $2,000 was the value of chainsaws which he gave the Defendant. The balance of $30,000 came from a bank loan which was secured by a mortgage over his house in Australia at 12.5% pa. He still owed $200,000 on his mortgage.

[10] He recognised an extract from the Australian company’s Minute Book signed by the Defendant (P2). It recorded the tabling of an application to buy 50% shareholding in the company from the Defendant, the Defendant’s consent to the transfer and resolution to transfer the shareholding to the Plaintiff as from 1 July 2003. The extract is undated but the application for shares was dated 1 July 2003. The Plaintiff also recognised an extract from the Minute Book (P3) stating that he was appointed as a director of the company on 27 July 2003, also signed by the Defendant. These documents were prepared by the company accountant. The Plaintiff was appointed a director but never became a registered shareholder. A search of the company (ABD[2] 8) by his solicitors in June 2005 showed that the Plaintiff was appointed a director on 27 July 2003 but all of the company’s 1,000 fully paid up $1 ordinary shares were still held by the Defendant.

[11] He said the agreement to transfer shares in the Australian company came about after he lent $28,000 and the $2,000 worth of chainsaws. The Defendant wanted more money. He knew nothing about the company before hand. The Defendant then said that he would transfer half of the shares in that company to him. The Defendant also promised to give him the same for his Fiji company, Global Cargo Traders Ltd.

[12] In cross examination, the Plaintiff said that he did not want to invest in Macquarie Traders at first but the Defendant forced him into it later because the Defendant did not want to repay his money. He knew and understood what the company documents were when he signed them in July 2003. He also confirmed that he was to get shares in the Fiji company too although he admitted that he did not get FTIB approval but thought it was the company secretary’s job to get it. He knew that he was investing in the company which was to buy goods in Australia and deliver them to Fiji and that was what he agreed upon. He also understood that he was to be half owner of the Fiji company because the Defendant told him that he would bring the money from Macquarie Traders to Global Traders to buy a property in Rakiraki. He was to be a half owner of that as well. It was only on that basis that he agreed to invest in Macquarie Traders. Forty thousand dollars was for Macquarie Traders and $30,000 was to be paid to Global to buy a building in Rakiraki.

[13] He confirmed that he only received $12,000 back. The payments were made in bank cheques issued monthly by Macquarie Traders between 29 October 2004 and 11 November 2004 of $1,000 each. He gave the deposit slips to the Defendant and the Defendant deposited the moneys in his account. When he went to Rakiraki and asked the Defendant for the balance of the loan, the Defendant swore at him and his wife.

[14] In November 2005 he got his wife to write a letter of complaint to the Australian Securities and Investments Commission (ASIC) about the Defendant which he signed (ABD10). He said it was to inquire whether the Defendant had transferred the shares in the Australian company, Macquarie Traders Pty Ltd, to his name. The letter was not dated but it was noted as having been posted on 3 November 2005. The complaint was in respect of events in September 2004. The letter said:

I was asked to invest in the company and become a director and shareholder 1/7/03. I borrowed $28,000 and paid this to Macquarie Traders 4/7/03. I further borrowed 2049 on 16/7/03 for goods – chainsaws – a further $30,000 was borrowed on 8/8/03, after speaking with accountant. I was told I was to be made a shareholder. I am not listed as a shareholder, also a company director. I have never been advised of any meetings of directors or any AGM of the company. When speaking with Mr Narayan he told me he could not give me any shares. I have seen no documentation of goods sent overseas. I can’t pay back any money in lump sum or any other way. I have not received any money back. I have information that he purchased a business in Fiji with money that belongs to Macquarie Traders. I also know that he has recently been deported to Fiji on 12 September 2005. Also I have been told that Mr Narayan’s son Anish Narayan is currently running Macquarie Traders without my authorisation as a director.

I wish to find out how I stand as a director to take over the running of this company.

Please advise me asap.

[15] A short reply from ASIC dated 8 November 2005 was followed by a full response dated 25 November 2005 which basically stated that the Plaintiff should seek professional advice because the Commission could not assist.

[16] It is an agreed fact that on 3 January 2006 the Plaintiff met the Defendant at his office Rakiraki. The Plaintiff said that he asked for his money but was abused by the Defendant and was chased out of the office. The Defendant denies it.

[17] The Plaintiff’s wife gave evidence. The Defendant is her mother’s cousin. He came to see her in October 2000 to ask for money from the Plaintiff. He came 3 times. In October 2000, the Defendant asked for $3,000. In February 2003, he came to her house in Sydney and asked for $7,000. She gave the money to the Plaintiff who gave it to the Defendant. It was from her own bank account. Macquarie Traders was not mentioned in their meetings and she had not heard of it before.

[18] The Defendant’s evidence was that he lived in Sydney from 2002 to 2005. He came back to Fiji in September 2005. He was not deported from Australia. The $70,000 was lent to Macquarie Traders and not to him personally. The Plaintiff was to take half of the shares in that company. The Fiji company is owned by him and his wife. He denies that the Plaintiff was to be given shares in that company. He said, it was the Plaintiff and his wife that were coming to his place to see him about investing in Macquarie Traders. He told them that the company needed $70,000. It was the Plaintiff that offered to invest $3,000 first and then later the amounts totalling $70,000. He confirmed that $12,000 had been repaid plus an additional $1,000 by cash from a company cheque issued by his son. The Plaintiff agreed to buy shares in Macquarie Traders from the balance but not in the Fiji company. He said he gave the transfer of shares to his accountant to register it. The Plaintiff did come to ask for his money back but he told him that he was only entitled to shares and not the money. He is willing to transfer the shares in Macquarie Traders.

[19] In cross examination the Defendant said he was educated to Form 4 level. He stayed in Australia for 7 years on a business visa. The Fiji company was not formed until 2000 after he had gone to Australia. The company search shows that the company was registered on 25 February 2000. Although he admitted that such a loan to an Australian company would be documented, he did not produce any documentation to show it. The reason, he said, was that the documents were in Sydney. He did not answer when it was put to him that he was not telling the truth, that he should have disclosed the documents but was deliberately withholding them.

[20] The Defendant however under intense cross examination said that the $7,000 and the $3,000 were lent to Macquarie Traders which the company paid back. Then after that the Plaintiff asked for shares in the company.

ANALYSIS OF THE EVIDENCE

[21] I do not think that the Plaintiff’s claim based on a loan to the Defendant personally can stand in the face of the transfer of shares and his appointment as director in Macquarie Traders. These documents (July 2003) pre-dated the repayments of the $12,000 (October 2004 to November 2005).

[22] It seems to me that the first lot of money totalling $10,000 was lent to the company. It came from the Plaintiff’s wife. It seems to me that the only plausible explanation was that the repayments were to repay this loan as the Defendant said.

[23] Thereafter, the Plaintiff invested his own money in the company. The first investments of $28,000 and the $2,000 worth of chainsaws were made on 4 and 16 July 2003 - the Plaintiff’s own evidence as recorded in his letter of complaint to ASIC. It was around this time that the transfer of shares (1 July 2003) and the appointment as director of the company (27 July 2007) were executed. The purchase of the chainsaws supports what he said the company was trading in.

[24] Also, the Plaintiff’s own letter to ASIC in November 2005 only spoke of investment in the company. I do not accept that he was mistaken or that his then wife incorrectly wrote what he wanted written. As he said in his evidence, he knew and understood what he was signing. I do not accept that this was a case of non est factum or deceit by the Defendant. It is simply a case of an investment gone wrong.

[25] I do not accept that the Plaintiff was promised shares in the Fiji company. The lack of documentation suggests that no such promise was made. Why was the same not done for the Fiji company as for the Australian company? Also, the Plaintiff is an elderly man living in Australia and I would be surprised if he was interested in investing in Fiji.

[26] Having so found on the evidence that this was a failed investment of AUD$60,000 rather than a loan, the Plaintiff’s claim for repayment of AUD$58,000 must fail. He is only entitled to registration as owner of 500 ordinary fully paid up $1.00 shares in Macquarie Traders Pty Ltd. The Defendant says he is willing to transfer those shares to the Plaintiff but there being no such relief being claimed, I accordingly make no order in this regard and leave it to the Defendant to honour his promise as he had given under oath to this Court.
[27] The initial loan of AUD$10,000 by the Plaintiff’s wife had been repaid so no claim can be made in that respect as well.

COSTS

[28] This is a family matter which should have been resolved without resort to this Court. I therefore exercise my discretion and make no order as to costs.

ORDERS

[29] The Orders are therefore as follows:

1. The Plaintiff’s claim is dismissed.

2. There is no order as to costs.

Sosefo Inoke
Judge

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^[1] Minor amendments made in November 2009 and at the trial.
^[2] Agreed Bundle of Documents.